Silver, Gold and Economic Exchange

$440,000 Each, A Best Case Scenario for Bitcoin

I believe that each Bitcoin could someday be worth about 440,000 dollars. This may seem like an outlandish claim, but it is very possible. Imagine that tomorrow the whole world adopted Bitcoin as the currency used for pretty much every transaction.

Here is the reasoning. The world’s GDP is about $55,000,000,000,000, 55 trillion for those of you whose eyes can’t handle that many zeros. In 2012 the annual velocity of the average dollar was about 6. The average dollar changed hands about six times. I will admit that for the sake of ease of my calculation I have assumed the same velocity for all other nation’s currencies as well as the whole world using dollars (the values of the other currencies are taken into account). I take the 55 trillion number and divide it by six to get the number of dollars in the world economy. I get 9.61 trillion. Divide that by 21,000,000 (the final number of Bitcoins) and you get $436,500 per Bitcoin.

Admittedly a lot of things have to go right for Bitcoin and wrong for other currencies before this price is realized, but the potential is there. Even if you believe the chances of Bitcoin become a universal currency are low I would still contend that the potential for return way out ways the potential for loss. Besides as you buy Bitcoins now the price goes up and entrepreneurs look for ways to earn and exchange Bitcoin more readily. Feel free to suggest improvements for my reasoning in the comments section below.

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The reason this would never actually happen is that if bitcoins take over the world… the other currencies would necessarily have to become worthless. So instead of bitcoins approaching a steady-state value of $400K USD per bitcoin (or some such high number), they would instead pass it by very quickly towards infinity USD per bitcoin, which would just be the point where nobody bothers thinking in USD anymore.

Your point is correct; however I am talking about 2013 dollars. A Bitcoin would have the purchasing power of $440,000 of today’s dollars. If you prefer a more stable measure, a Bitcoin could one day buy about 4000 barrels of oil or 270 ounces of gold.

The biggest problem I see with this analysis is that it uses today’s GDP numbers combined with the number of bitcoins which will exist a century from now.

By the end of 2012 only about half the total number of bitcoins was mined, so that would double your estimate to about $880 thousand.

On the other side, we could try to guess what world economic output will be in 2140 when all 21000000.00000000 bitcoins have been mined. Let’s assume a world wide population of 10 billion (our current best guess of where population will peak before declining fertility rates cause the birth rate to drop below replacement), that the US has the same fraction of the world’s population as present, that US GDP grows at an average of 3% per year, and finally that by 2140 the rest of the world has the same per-capita income as the US.

This produces an estimate of 2140 world economic output of $22000 trillion (current dollars) when all the bitcoins have been mined, so a single BTC will be worth $175 million.